By Kyle Graves, Snell & Wilmer
The product development life cycle for medical devices, whether implantable devices, worn devices, or surgical aids, follows a costly and regulatorily complex path different from other industries. The cliché Silicon Valley strategy of “go fast, break stuff” does not work for medical devices, where rigorous trials and studies ensure safety and efficacy. Because of this long delay between prototype development and market readiness, medical devices demand unique intellectual property (IP) protection strategies different from other types of technology. While speed is of the essence in other product categories, strategic caution can lead to much stronger and more cost-effective IP rights when developing protection for an emerging medical technology. This article surveys a few lessons learned and best practices to preserve the valuation of medical device technologies during the early, lean years of product development and to maximize revenue potential following regulatory approval.
1.Do Not File Your U.S. Patent Application First
High-tech patentees file in the U.S. first. This is often a mistake for a medical device patentee. Consider beginning with a provisional patent application followed by a global placeholder application – a Patent Cooperation Treaty (PCT) patent application. You can file in the U.S. later after collecting some useful strategy information during the PCT process. The goal here is to delay protection while the prototype matures to market-readiness.
2. Do Not Forget The Medical Tourism Countries
High-tech patentees often focus on the U.S., European Union, and larger Asian jurisdictions for patent protection. This is often a mistake for medical device patentees. Emerging markets in Central America, South America, the Middle East, and Southeast Asia are hotbeds of medical tourism. Many of these countries also have particularly formal procedural requirements that make the patent process tricky. As already mentioned, consider beginning the patent journey with a cost-effective PCT patent application to preserve your patent rights early in the product development process. Filing a PCT application will allow you to delay patent filings in smaller markets while you navigate the regulatory process and may preserve your rights while your device is used in actual procedures and other valuable medical studies in regulatorily less complex markets before you seek approval in regulatorily more complex jurisdictions.
There is always a balance between protecting the medical device while yet allowing for iteration during the regulatory review, medical study, and other pre-approval processes. Often, initial product rollout in less regulatorily complex jurisdictions is a part of this balance, even if those jurisdictions may not be the prime revenue market for a product or may not even be identified at the time you begin the patent process.
Filing a PCT application affords innovators an option to secure rights in these initial markets and to operate across many jurisdictions without harming long-term patent protection in the primary jurisdictions responsible for revenue potential. This is much more flexible than attempting to identify your global market before your product has reached the global market.
3. Do Not Forget The Manufacturing Hubs
There may be jurisdictions with little natural market for a product or with political difficulties relating to enforcement of medical device-related patent rights. Coincidentally, these jurisdictions may be among the most cost-effective locations to manufacture your medical device. Similarly, there may be jurisdictions that your competitors are likely to target for the manufacture of competing or infringing devices. Again, by slow-rolling global protection strategies under the protective umbrella of a PCT patent application, you can delay this decision until more market data are available. Eventually, you will likely want to protect your rights not only in the home countries of your customers but also the industrial locales favored by your competitors’ manufacturing functions.
4.Leverage Jurisdictional Arbitrage
Different jurisdictions examine patent applications with greater or lesser rigor. Yet, due to the global treaty framework, patents granted in both more rigorously examining jurisdictions and patents granted in less rigorously examining jurisdictions may enjoy similar reciprocal treatment under a set of treaties commonly referred to as “the Patent Prosecution Highway” (PPH). Once the PCT patent application stage concludes and you begin pursuing national rights in different signatory states of the PCT treaty, you can use the PPH to explore “jurisdictional arbitrage” strategies.
To implement jurisdictional arbitrage strategies, a patentee will file PCT-based national stage applications in both types of jurisdictions – those with rigorous patent examination mechanisms and those with “rubber stamp” patent examination mechanisms. By filing parallel national applications in both rigorously examining and less rigorously examining countries, a patentee can pivot among global protection strategies as the product development life cycle advances.
A good attorney can help with this pivoting process by selecting both rigorously examining and less rigorously examining countries that honor the PPH treaties. Because countries that belong to the PPH give deference to the patent granting decisions of one another, patentees who seek protection in both relatively “easier” and relatively “harder” countries can pivot between building a global portfolio of (1) quickly granting but weaker patents and (2) slower granting but stronger patents.
These pivots let innovators balance licensing revenue, enforcement demands, and capital raising goals as business objectives change through the long product development cycle. For other types of inventions where the development cycle is shorter, jurisdictional arbitrage may be unnecessarily complicated, but for medical devices it can deliver significant value and can allow entrepreneurs to enforce IP rights against emergent competitors even before an IP portfolio is fully developed.
5. Consider Alternative Protection Vehicles
Some jurisdictions, including certain large European markets, provide for “utility model” registrations that are a quickly granting alternative to utility patents. A utility model is a statutory right to exclude others from practicing an invention and is very similar to a patent, except that a utility model is both easier to obtain and also easier for a challenger to invalidate. Utility models register very rapidly and are presumed valid until proven invalid by a challenger. These provide an early first line of defense while more substantial utility patent rights are developed and, much like all the IP rights mentioned in this article, the process can begin with a provisional utility patent application followed by a PCT patent application. Utility model registrations are presumed valid and enforceable until challenged, meaning the owner of a utility model registration can attack infringers and seek licensing revenues even before the scope of IP rights is completely defined.
6. File In More Countries Than Needed, Then Drop Cases Later
Most jurisdictions require the payment of annual maintenance fees during the pendency of patent applications and even before a patent is granted. However, during the early product development life cycle, a medical device innovator may be uncertain of which countries will prove most lucrative. For instance, there may be significant opportunity in countries with government-provided medical care programs to enter high-volume license agreements with state health ministries to adopt innovative technologies for national distribution. At the same time, these countries may exhibit poor market dynamics and reduced long-term growth opportunity once an agreement with the state health ministry is in place. Similarly, there may be significant manufacturing opportunities in countries with little medical demand or few end customers – particularly if the medical device is cosmetic or lifestyle-related.
In these cases, there may be a benefit to filing many national applications claiming priority to the PCT patent application, then “slow rolling” the patent process in the different countries and eventually abandoning efforts in those countries that have limited long-term value generation potential. Combining this strategy with good use of jurisdictional arbitrage can be doubly powerful to ward off third-party competitors initially, while winnowing down ongoing patent maintenance fees once the revenue landscape coheres in fewer key markets.
7. Your Infringer Is Your Friend
Many high-tech inventions rely upon network effects and the capture principles associated with natural monopolies. Not so with medical devices. As a result, there is less urgency to immediately attack and shut down potential infringers. This means two things: 1) a medical device startup often has the luxury of slow-playing the development of a global patent portfolio by using the methods mentioned above and 2) if done properly with risk minimization in mind, it can be very useful to silently monitor infringers while they invest in marketing and other consumer-facing awareness efforts, expending their own money to bring product awareness to a local market. Only after the infringer has expended significant sunk costs in developing a market and marketing the need for a medical solution to a particular problem do you begin licensing or enforcement discussions. Done correctly, your company has either saved a significant amount on local marketing efforts or, alternatively, your company has developed a licensing partner in a new jurisdiction. Of course, in prime markets where you expect to be the first mover, considerations may be different.
8. Satisfy Local Public Policies Against Patenting Medical Treatments
Many jurisdictions prohibit patents for methods of medical treatment or disease diagnosis, or for treatment of the human body. Do not let this dissuade you from IP protection. There are ways to draft the patent to satisfy these complex rules and still achieve strong legal protection. For instance, perhaps you protect an implantable medical device or a method of manufacturing the device, but not a surgical procedure to install the device. The hospital employing the surgeon will, at some point, purchase the device for implantation in the patient. By crafting the patent appropriately, the infringing act is the purchase transaction, not the medical procedure.
Conclusion
Protecting medical devices requires a renewed awareness of national borders and variations among the intellectual property regimes of different jurisdictions. As medical tourism increases and as attention turns to opportunities in growing international economies, medical device manufacturers may want to pay increasing attention to protecting their intellectual property at intermediate points along the manufacturing supply chain and in “vacation destinations” where medical tourism industries are thriving. These jurisdictions may not be the typical jurisdictions favored by other high-tech industries.
The considerations in this article encompass a few lessons the author has learned through experiences in the medical device manufacturing industry across the world and, particularly, through experiences with cost-sensitive medical device startups looking to navigate the regulatory approval environment in parallel with raising capital and developing the intellectual property protection needed to facilitate further revenue growth.
About The Author:
Kyle Graves, counsel at Snell & Wilmer in their Dallas office, is a member of the firm’s Intellectual Property practice group and provides a practical approach to intellectual property counseling, IP-related business transactions, and the enforcement and defense of IP rights. He works with clients to develop individually crafted combinations of patent, trademark, trade secret, copyright, and contract strategies in the United States and globally. He can be reached at kgraves@swlaw.com.
